What the FHA?!
Posted on April 18, 2009
Filed Under Loans |
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Have you ever thought of buying a house? Do you think you could not afford it? Relax, there is always a way thanks to the miracle of FHA home loan.
What is FHA?
A loan provided by FHA allows anyone to purchase any house using a minimal down payment of three percent, instead of percentages that are higher usually required in other conventional and traditional loans.
Through the loan program of the FHA, buyers who are to purchase a house for the first time as well as those who are short of funds will be the beneficiaries of this program.
Take note that FHA loan programs are not the ones responsible for making home loans, what the FHA actually does is insure these loans.
At any instance a particular buyer defaults, the one lending will be paid. The payment will come from the funds of the insurance.
In order to acquire an FHA loan, one has to have a good if not excellent credit history as well as income that is sufficient enough to be qualified.
FHA loans, could you afford it?
In order to be qualified for a loan via FHA, the housing monthly costs must not go beyond twenty nine percent of one’s monthly gross income.
Total costs for housing also include principal mortgage, interest, insurance and property taxes.
These terms almost always go together and is referred as PITI.
The following formula is a big help to make this concept more understandable. Monthly income multiplied by .29 is equal to the PITI at its maximum.
So if one’s monthly income is $3,000, the maximum PITI is $870. The monthly total costs with the PITI added and the debt (in the long term) will not exceed 41% of your monthly gross income.
Included in these long debt terms are balances in credit card and car loans.
Acquiring a loan via FHA
In order to acquire a loan, your income must be able to pay your debt monthly. You must also have appropriate cash in order to place an initial down payment during closing time.
Also, the costs for closing must also be paid by you. This is normally two to three percent of the home’s price. Included in these costs are the homeowner’s insurance, the fees for the attorney, a title search fee, insurance title as well as a Private Insurance Mortgage (that is if your payment is 20% less than the down.)
All in all, an FHA loan is a big help for those who are seriously considering to have a home sweet home to call their own.
